from the how-nice-of-them dept
As Muckrock notes at the end of its piece:
Just GLOMAR us next time, IRS. Save us both a lot of grief, and it's a lot less cruel.
by Mike Masnick
Tue, Jul 21st 2015 1:53pm
Just GLOMAR us next time, IRS. Save us both a lot of grief, and it's a lot less cruel.
by Tim Cushing
Tue, May 26th 2015 3:58pm
The government that wants so badly to be the world's leading cyberwarfare force still seems largely unable to fence in its own backyard. In Yet Another Breach™, the sensitive financial information of thousands of Americans is now in the hands of criminals.
The IRS announced today that criminals used taxpayer-specific data acquired from non-IRS sources to gain unauthorized access to information on approximately 100,000 tax accounts through IRS’ “Get Transcript” application. This data included Social Security information, date of birth and street address.So, not actually "hacking," per se, as much as the gaming of system just begging to be gamed. The information criminals needed to obtain this data may have been "specific" to each registered taxpayer, but it was also information that rarely, if ever, changed.
These third parties gained sufficient information from an outside source before trying to access the IRS site, which allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer.
This sort of authentication, called knowledge-based authentication, is highly vulnerable to fraud. It's based on information that never changes, and such data is widely available to anyone willing to pay for it from stolen financial information marketplaces. The transcripts that were fraudulently downloaded were likely made accessible due to leaked Social Security numbers and other personal data from any one of the many recent data breaches, including those at health insurers Anthem and CareFirst. In fact, security reporter Brian Krebs reported on the risks inherent in the IRS' transcript request system way back in March. He warned taxpayers to sign up for accounts on IRS.gov if only to prevent someone from creating a fraudulent account for their records first.The IRS is reassuring Americans that its "core systems" remain secure, something of little comfort to the 100,000 taxpayers who will be receiving mea culpa letters (and free credit monitoring) from the agency over the next few weeks. What the IRS considers to be adequate protection is apparently not nearly adequate enough. Once the data is out there, verification information can be used to gain access to credit cards, bank accounts or anywhere else the same sort of canned questions are presented during the signup process. The 50% success rate suggests unique personally-identifiable information isn't necessarily all that unique.
In all, about 200,000 attempts were made from questionable email domains, with more than 100,000 of those attempts successfully clearing authentication hurdles.The IRS is quick to add that 23 million records were "safely" downloaded during this same time period, which isn't really the comforting statement it means it to be. All this means is that millions of downloads weren't linked to "questionable" email domains. That's not the same thing as 23 million downloads going to the actual owners of that information.
by Tim Cushing
Fri, May 15th 2015 12:43pm
Federal prosecutors have dropped an attempt to seize $107,000 from a North Carolina small business owner using asset forfeiture laws following several weeks of media scrutiny.McLellan's case was raised (as a "hypothetical") by Rep. George Holding during IRS testimony in front of the House Ways and Means Committee. Holding asked IRS Commissioner John Koskinen why the agency was continuing to pursue a questionable "structuring" case against McLellan, considering both the IRS and the DOJ had issued policy revisions stating the government would not do this unless there was evidence the deposited money originated from criminal activity.
According to the Institute for Justice, a public interest law firm, the Internal Revenue Service and Justice Department moved Wednesday to voluntarily dismiss their case against Lyndon McLellan.
McLellan still had to pay for a lawyer, not to mention $19,000 to have his business audited. The government also refuses to pay for interest earned on money after it has been seized.While the IRS may be curbing its dubious forfeitures, there are still problems that need to be addressed within the DOJ itself.
Last week, the Justice Department said it would investigate two other prosecutors after one business owner whose assets were seized said he had been punished more harshly after publicizing his case and another said he had been threatened with a felony charge if he did not agree to give up some of his money.Kind of dispels the notion that asset forfeiture has anything to do with "justice." As these programs continue to suffer from mainstream exposure, those heading up prosecutions seem unwilling to scale back their efforts accordingly. They can see the revenue stream drying up and they're getting desperate. There will be more than a few forfeiture victims whose cases will stay off the radar. Unfortunately for them, these "zealous" prosecutors appear willing to do whatever they can to ensure funds seized with no evidence of criminal intent or origin remain inaccessible to those who actually earned them.
by Tim Cushing
Tue, May 12th 2015 3:51pm
Late last year, the IRS began dropping some of its more questionable asset forfeiture cases, most likely in response to reams of bad press about its sketchy enforcement of structuring laws. Many of these cases were built on nothing more than a series of deposits that came close to -- but never exceeded -- the $10,000 needed to trigger federal reporting. While the IRS may say it's looking for tax cheats, fraudsters and money launderers, its targets were often small, cash-based businesses like restaurants and vending suppliers.
The IRS also announced that, going forward, it would only pursue asset forfeiture cases that showed the money came from an illegal source. The DOJ followed this up with its own policy shift that roughly matched the IRS's.
Despite this change of heart, the IRS and DOJ are still pursuing a case against Lyndon McLellan -- a convenience store owner who had $107,000 taken from him by the feds late last year. McLellan -- on the advice of his banker -- began inadvertently "structuring" his deposits, again to "save" his bank from the burden of extra paperwork. There was seemingly no doubt his business generated the cash he deposited, but the IRS went after him anyway.
McLellan's legal representatives (from the Institute of Justice) forwarded details of his case to legislators ahead of IRS testimony in front of the House Ways and Means Committee. One legislator took this time to confront IRS Commissioner John Koskinen about his agency's contradictory prosecution of McLellan.
Without naming McLellan, Rep. George Holding (R-N.C.), a former U.S. attorney, asked Koskinen about the seizure:This should have resulted in the IRS dropping the case, or at least providing something in terms of evidence justifying its continued pursuit of McLellan. If nothing else, the agency could have played this off as an unfortunate oversight by its prosecutorial arm. Instead of any logical outcome, this questioning resulted in the federal prosecutor handling McLellan's case claiming the real problem wasn't the pursuit of a bogus prosecution. No, the real problem here was people disrespecting the power of a gag order.
Holding: Are you saying that under the new policy, you have to aver that we have probable cause to believe an illegal act is taking place other than the act of structuring?
Holding: You sure about that?
Koskinen: That's what I'm advised by the people who run the Criminal Investigation Division.
Holding: The staff pulled for me a case from North Carolina, from my former prosecutorial district, after your policy change. And I've read through the affidavit and the associated documents. There's no allegation of illegal activity, other than the act of structuring...
Koskiken: If that case exists, it's not following the policy.
I'm a bit concerned. At your request, I provided you a copy of the application for seizure warrant, which remains under seal with the Court, and now it appears it has been made available to a congressional committee? I do not know who did that, and I am accusing no one, but it was not from our office and could only have come from your clients. That was certainly not my intent in making this available. Whoever made [the document] public may serve their own interest but will not help this particular case.Oh, and that the public exploration of this contradictory prosecution hurt the feelings of West's office, if not the IRS itself.
Your client needs to resolve this or litigate it. But publicity about it doesn't help. It just ratchets up feelings in the agency.And, finally, a half-off sale on sour grapes.
My offer is to return 50% of the money. The offer is good until March 30th COB.As Reason's Jacob Sullum points out, there are valid reasons for filing these affidavits under seal. Notifying a structuring suspect of the IRS's intent to seize funds would probably result in a swift draining of targeted accounts. Whether the seizure is justified or not, there's at least a solid reason for the gag order. But in this case, the IRS had already seized the funds and moved forward with its prosecution. There was no "fear of flight," at least not in terms of the money in McLellan's accounts. West's nod to the power of sealed affidavits isn't due to fear of a compromised investigation, but rather due to his irritation at having one of his prosecutions publicly outed as running contrary to both the IRS's and DOJ's policies on structuring seizures.
by Mike Masnick
Fri, Apr 17th 2015 7:39pm
"What concerns me, as the head of a... law enforcement agency, is that we not put out of reach of lawful process... what is often, sometimes the only, but critical evidence of a serious securities fraud.... And we use that authority quite judiciously, but it's extremely important to law enforcement."What struck us as interesting last year was White admitting that the SEC appeared to regularly use this process, since she noted that it was "extremely important" and provided "critical evidence."
"While these discussions have been going on, to try to sufficiently balance the privacy and the law enforcement interests, we've not to date to my knowledge proceeded to subpoena the ISPs. But that, I think, is critical authority to be able to maintain -- done in the right way and with sufficient solicitousness and it's very important to the privacy interests which I do think can be balanced.As I said, if you watch her entire response, it's a complete mess of half-finished thoughts, which seems rather typical of someone trying to sound like they're answering a question but not actually doing so. Later in the same answer, she insists that taking away this authority might take away an important tool.
by Mike Masnick
Thu, Feb 5th 2015 4:06am
by Tim Cushing
Thu, Jan 29th 2015 9:35am
The government acknowledged in its agreement to return the money that the Hirsch brothers, who operate Bi-County, were never charged with any crime. In fact, all of the money deposited by the Hirsches was lawfully earned from their small business, according to the Institute for Justice, a libertarian law firm in Arlington, Va., that represented the Hirsches.The Hirsch case was helped by the family's retention of a forensic accountant, who prepared a report analyzing the company's deposits and financial transactions and handed it over to federal prosecutors. However, it was not helped by the IRS' refusal to make the next move after it seized the family's money back in 2012.
During the two-and-a-half years that the government held the money, federal prosecutors filed no formal action in court to complete the forfeiture, which deprived the Hirsch brothers of an opportunity to contest the seizure in court.So, media heat or not, it took a lawsuit filed by the Hirsch family to finally regain the $447,000 from the IRS. The settlement doesn't do much for the family who spent more than two years fighting this, as the agreement stipulates each party is responsible for its own legal fees. This will hit the Hirsches harder than it hits the US government since only the former party will be paying out of its own pocket.
by Tim Cushing
Tue, Dec 16th 2014 4:08am
As reflected in the affidavit in support of the verified complaint, from April 2012 through February 2013, more than $315,000 in currency was deposited into Mrs. Lady’s, Inc. bank account in approximately fifty-five separate deposits. No individual currency transaction exceeded $10,000 during that period. A sample of cash transactions between May 2012 and August 2012 showed a pattern of deposits consisting of frequent large deposits in amounts under $10,000 that were near in time to smaller deposits that, taken together, would have triggered bank reporting requirements.Hinder's defense was that her mother had advised her to break up the deposits into smaller amounts as a "convenience" to the bank. Staying below the reporting requirements does actually make the bank's work easier (and the customer's), but the IRS (and law enforcement) view this sort of behavior, no matter if it's linked to criminal activity or not, as "structuring" -- deliberate attempts to avoid reporting large amounts of cash to the government.
Pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure, the United States hereby moves to dismiss, without prejudice, the instant case. Despite two judicial probable cause finding supported by Claimant’s clear pattern of manipulating bank deposits below $10,000 in order to evade the reporting requirements of 31 U.S.C. § 5313, plaintiff believes, in the exercise of its prosecutorial discretion, that allocating its limited resources elsewhere would better serve justice in this case. Notwithstanding, the request herein, the request should not be construed as an acknowledgement or admission to any liability or wrongdoing whatsoever.The dismissal is without prejudice, meaning the IRS is still free to pursue this in court in the future. The court also notes that this voluntary dismissal does not remove the IRS's claim to the disputed assets seized by the agency. So, it's not a complete win for Hinder, but it does at least indicate the IRS is somewhat responsive to negative press. The IRS does have limited resources, and it's going to be better off pursuing clearly illegal actions than chasing down fringe cases and fighting battles in two courts (federal and public opinion). The IRS has also announced that it will no longer pursue apparent "structuring" if there's no indication the money comes from illegal sources. This is a step in the right direction, especially considering asset forfeiture has become shorthand for government abuse and the agency's pursuit of small business owners seemingly nothing more than the intersection of vindictiveness and greed.
Whether or not the IRS is subjecting certain politically-affiliated groups to an unfair amount of attention remains to be seen. What is indisputable is that the agency's document retention policies are an unenforced joke. As citizens, we're required to hold onto pertinent financial records for 2-7 years just in case the IRS wants to look through them. The IRS, however, seemingly only retains records for as long as it can keep itself from inadvertently destroying them.
Emails from IRS official Lois Lerner have been sought for several months. At first, the IRS said it had them. Then it said it couldn't find them. Then it said Lerner's computer suffered a hard drive crash, taking with it a bunch of the emails being sought. Then it said more computers had crashed, taking out even more emails. Then it said it had recycled the crashed hard drives, making any data unrecoverable.
Questions were asked, most of them being "Bro, do you even back up files to a server?" Apparently, the IRS did no such thing, or was unaware of it, or didn't understand the question… and so on. The IRS admitted it told officials to print out and save emails (per internal guidance) but apparently no one took these rules very seriously, as there was no hard copy to be found either. A Justice Department official noted that there were backups, but that it was too hard to recover stuff from them, before dozing off in mid-sentence.
Now, all of a sudden (well, actually on a pre-Thanksgiving week Friday afternoon), the IRS has suddenly found the emails it claimed were lost.
Up to 30,000 missing emails sent by former Internal Revenue Service official Lois Lerner have been recovered by the IRS inspector general, five months after they were deemed lost forever.The prodigal Lerner emails have returned! And there was much rejoicing, especially in Darrell Issa's camp, which has been applying much of the pressure over the past several months.
The U.S. Treasury Inspector General for Tax Administration (TIGTA) informed congressional staffers from several committees on Friday that the emails were found among hundreds of “disaster recovery tapes” that were used to back up the IRS email system.
by Tim Cushing
Tue, Oct 28th 2014 7:58am
The Department of Justice and its underlings (the FBI and nearyl every law enforcement agency in the nation) have turned the ideal of asset forfeiture (defund drug dealers; return money to the defrauded, etc.) into a free-roaming, many-tentacled opportunistic beast, one that "liberates" any amount of "suspicious" cash from tourists, legitimate business owners or anyone else who just happens to have "too much" cash in their possession.
The IRS is in on this as well. The agency doesn't need to prove anyone is guilty of anything before seizing assets. It just needs to feel that things aren't quite right.
For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.The person whose money has been seized isn't necessarily guilty of anything. Hinders hasn't been arrested, nor does there appear to be any sort of ongoing investigation. The IRS hasn't hit Hinders with tax liens for unpaid taxes or subjected her to an audit. All it did was look at records for her deposits and decide that because none of them surpassed the $10,000 mark (which triggers automatic reporting), everything in the account must be somehow illegal.
The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.
Civil forfeiture is an in rem proceeding against the property itself, not the owner of property. Civil forfeiture is a process that is separated from, and not dependent on, a criminal prosecution. Civil forfeiture can proceed administratively or judicially.Hinders never needs to be charged. In fact, she never needs to be heard from again. The IRS can seize and hold this money indefinitely and decide whether or not the $33,000 is "guilty" without any input from Hinders. To opportunistic agents, any sub-$10,000 deposit is "evidence" that the depositer is deliberately avoiding reporting requirements, rather doing so for any number of more mundane, less criminal reasons.
Since he bought it in 1978, Terry Dehko has owned Schott’s Supermarket in Fraser, Michigan. His daughter, Sandy, began working at the store when she was 12 and now helps her father run it. The IRS has not argued before a court of law that Terry and Sandy have committed a crime, but that has not stopped it from seizing their entire bank account, worth over $35,000. The IRS claims that Terry and Sandy violated federal anti-money laundering laws by making regular deposits of cash in amounts less than $10,000.But the IRS has offered no evidence that money laundering has occurred. In fact, it has done nothing more than seize Dehko's money. The explanation for Dehko's deposit patterns make perfect sense, but perfect sense won't fund further IRS activity.
Their insurance policy, aimed at small businesses like their grocery store, protects them from theft, but only up to $10,000. Since any dollar over 10,000 left in the store is liable to uninsurable theft, Terry and Sandy make sure their revenues are deposited in their bank account before accumulating above $10,000.Anyone nailed by an IRS seizure can fight for the return of their money, but there's nothing resembling due process here. Those choosing to do so would have to file a lawsuit intervening in the IRS's forfeiture case. In other words, the situation must be forced. Simply showing up and defending money from accusations of wrongdoing isn't enough. In fact, it isn't even a possibility, at least not in this case. Prosecutors for the Dehko case offered the them a "deal:" an implicit admission of guilt via a plea bargain (presumably on behalf of the guilty money) and the return of 20% of the seized funds.
According to the Institute for Justice, the Department of Justice’s Asset Forfeiture Fund held $93.7 million of seized assets in 1986. In 2008, that fund was greater than $1 billion…Fortunately for the Dehkos, they won their battle against the government and had the seized funds returned. The IRS was ordered to produce proof of wrongdoing or release the funds. It chose the latter and was additionally held responsible for $71,500 in attorneys' fees. Dropping the case also allowed the IRS to walk away from the debacle without further legal examination of its civil asset seizure policies. So, while the Dehkos obtained a win, the IRS ultimately learned nothing from the experience. The fact that the average forfeiture battle racks up over $20,000 in legal fees means that more often than not, the IRS will get to keep nearly everything it seizes.
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